Wisconsin native, conservative critic of everything.
"Once abolish the God, and the government becomes the God." ---G K Chesterton
"The only objective of Liberty is Life" --G K Chesterton
"Fallacies do not cease to be fallacies because they become fashions" --G K Chesterton
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling

Tuesday, August 21, 2007

Does Club for Growth Understand Econ 101?

Beijing’s state-run Xinhua news service was quick to herald the latest lobbying effort on China’s behalf launched by the Club for Growth, a libertarian organization dedicated to electing public officials who agree with its free trade ideology. “More than 1,000 top American economists have signed a petition to urge Congress not to impose protectionist measures against China,” read the story filed by Xinhua from Washington on August 3.

"Free trade" for the US, but not for PRC:

What the Club for Growth is protesting are two bills passed by the Senate Finance and Banking Committees seeking to pressure Beijing to cease its currency manipulation, a practice that gives producers in China an unfair competitive advantage both in export markets and at home. China sets the value of the yuan by fiat, not by the market. It is thus rather odd, and intellectually dishonest, for the Club to defend Chinese government policy on the grounds that it is somehow an example of free trade or free markets. China’s largest banks are state-owned, as is nearly two-thirds of its industry. The country is run by a throughly protectionist elite.

Shall we review "Free Trade" History 101?

In the early 1990s, globalization cheerleaders argued that “free trade” would open “big emerging markets” to American-made goods, thus bolstering domestic growth and income. A decade of unprecedented trade deficits has turned that argument into hash. So now defenders of this academic sophistry have fallen back on the notion that “affordable goods” are the most important aspect of trade. Yet, no argument could be more logically twisted. Consumption is a use for wealth and income, it is not the source of wealth or income. It is the production and sale of goods and services that generate income. And income that is saved (i.e., not used for consumption) and invested in expanded production is what generates long-term wealth. This is what China is doing, using the American market to transfer money across the Pacific into their economy. Americans are being deceived into believing consumption financed by debt is the path to a higher standard of living. [Does "Alt-A" or "Sub-Prime" ring a bell?] That kind of profligate behavior is unsustainable as any real economist knows. Thus, when the petition claims, “China currently supplies American consumers with inexpensive goods and low-interest rate loans,” it is marketing distorted thinking that is dangerous to America’s economic health."Making stuff" is what builds economies. "Buying stuff" is done only because "making stuff" occurred first. America ceased being a colony when we started building our own machinery, making our own steel, and investing in industry and agriculture.

PRChina gets it:

Beijing understands what is at stake. Thus, the regime there reinforces the advantages they have in a nearly inexhaustible pool of cheap labor with subsidies, a misaligned currency, massive intellectual property theft, the complete neglect of environmental costs, and a diplomatic campaign aimed at securing resources and markets overseas. They are playing to win.And if your tires explode, or your doggie croaks, or your toothpaste is poison, or your kids' pajamas are formaldehyde-heavy, or your fish was grown in a pool of chickenshit, who cares?